Canadian National Railway Co. and
its unions are clashing over the right of employees to retire with a lump-sum
payout from the company pension plan before they turn 55, shedding light on the
carrier's struggles to retain aging baby boomers who would rather call it quits
early.

The case is slated to be presented to arbitrator Michel Picher in April, with
CN's unions arguing that management effectively rescinded a rule that allowed
long-time workers to cash out, typically at age 53 or 54.

For workers who started at CN in their late teens or early 20s, the pension
payout would often surpass $500,000 or even $700,000 in some cases for
conductors and engineers who put in long hours away from home, the unions say.

In complaining about scaled-back pension benefits, the unions plan to point to
an internal memo from mid-2006, when CN senior vice-president of human resources
Les Dakens expressed concern about a flurry of early retirements.

"We have recently seen an increase in the number of employees resigning from the
company and requesting the lump-sum option," Mr. Dakens wrote, explaining CN's
decision to clamp down on early retirements. "The growing practice of
withdrawing the lump sum from the Pension Trust Fund prior to reaching the
earliest retirement date, age 55, can be detrimental to the financial health of
the plan."

The Canadian Auto Workers union is filing the pension grievance, backed by
others such as the Teamsters Canada Rail Conference, United Transportation Union
and International Brotherhood of Electrical Workers.

"With the large number of baby boomers becoming eligible for retirement in the
coming years, CN has a strong interest to retain qualified and experienced
employees," Mr. Dakens said.

The CAW is asking the arbitrator to review whether Montreal-based CN was
entitled to reduce the "deferred pension or commuted value" of a pension by 60
per cent, if employees quit or are fired before age 55.

Last year, CN chief executive officer Hunter Harrison estimated that half of
CN's unionized work force of 12,200 people could retire within the next decade.

Mr. Harrison added that a 15-day strike in February, 2007, could be traced to a
clash between a pension-focused, aging work force and management's desire to
recruit young employees willing to tackle flexible hours and work weekends.

"As our employees retire, we are recruiting new employees who have values based
on today's society. Our new employees are less interested in pensions than they
are in knowing they have schedules," wrote Mr. Harrison in an internal memo to
employees.

His comments upset union leaders, but CN officials later said that the CEO's
remarks were misunderstood, emphasizing that the railway is keen to keep veteran
employees on its payroll.

A CN spokesman declined comment Friday, noting the pension dispute is scheduled
to go to arbitration. In a statement last year, CN assistant vice-president of
public affairs Mark Wallace stressed that "we have increased the incentive to
work longer to reach retirement age. We have removed the mandatory retirement
age of 65. We are also developing a retiree-coach program, to hire retired
railroaders to coach new staff."

Mr. Wallace defended the railway, saying that "CN has one of the best pension
plans in Canada, and the company is proud of that."

Union officials also fear that CN is poised to effectively penalize employees
who retire between the age of 55 and 65.

The CAW asserts that "CN has refused to guarantee in writing that it will honour
its statement of intent" to grant crucial "consents" to workers who opt for
early retirement even after they turn 55.

"CN has advised that it will challenge the arbitrator's jurisdiction to hear any
matter related to the pension plan," the CAW said. "The union replies that
pensions have always been the subject of collective bargaining, therefore
disputes can go to arbitration."